What are cryptocurrencies?
There are many currencies, such as the British pound, the euro and the American dollar. For the last few years there have been not only physical (tangible) coins, but also digital coins. These coins are also called cryptocurrencies.
What is a cryptocurrency?
A cryptocurrency is a digital currency. This currency is not issued by a bank, but is completely separate from the many financial institutions and the various governments. Cryptocurrency is based on cryptography, or a combination of technical codes. The money is not tangible, but is stored in a virtual wallet. You can therefore only spend this money online.
The best known cryptocurrency is Bitcoin. This coin was introduced a few years ago and has become very valuable. This is because the demand for cryptocurrencies has increased explosively in recent years.
The history of cryptocurrencies
The financial crisis broke out in 2008. Shortly after, Satoshi Nakamoto (possibly an alias) published the document ‘Bitcoin: A Peer-to-Peer Electronic Cash System’. This document explains the Bitcoin’s invention: a peer-to-peer digital network for payments. The highlight of this network: there are no banks and governments between.
At first, the Bitcoin was therefore not a digital currency, but a system to transfer money to other parties without the intervention of a bank or government. Eventually, it evolved from a payment network to a digital currency. Since the creation of the Bitcoin, many more crypto coins have been launched, including Ethereum, Ripple and Litecoin.
There are several methods for obtaining crypto coins. First, you can buy these coins. This can be done directly at the seller, but there are also platforms that sell Bitcoins.
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If you do not want to spend money on your digital coins, you can also ‘mine‘ them yourself. This means that you put your computer to work to ‘make’ coins for you. Your computer writes certain codes in a special computer program and this allows you to obtain Bitcoins. This of course takes longer than buying crypto coins.
Investing in cryptocurrencies
Some people buy crypto coins to pay with these coins, but most people invest in cryptocurrencies to make a profit. If you buy your crypto coins when they have a low value and sell the coins when their value is very high, you can make a profit.
The first people who invested in the Bitcoin paid little money to do so. Because the Bitcoin is now extremely valuable, these people have become millionaires for a tiny investment in the past.
It is difficult to become a millionaire with cryptocurrencies if you invest in them now, but making a profit is certainly possible. If you buy at the right time and sell the coins again at the right time, you can earn a lot of money with this. Profits of a few hundred or several thousand are common, even with new investors.
On the other hand, investing in cryptocurrencies is very risky. You will not be the first investor to lose his or her entire deposit with investments in bitcoins.
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